Ueda: Japan's surplus rests on investment income of over 6% of GDP, kept up by firms' saving

Victoria Shinder07 November 2026, 12:222 min read

Bank of Japan Governor Kazuo Ueda gave the 2026 Michel Camdessus Central Banking Lecture at the International Monetary Fund on 6 November, with the text published by the Bank on 7 November. The speech, titled Japan's Current Account Surplus and Corporate Adjustment, does not discuss the policy rate; it is a long look at why Japan's external surplus has persisted for four decades.

Ueda notes that Japan's current account alternated between deficit and surplus until the early 1980s and has since been in persistent surplus, generally between 2% and 4% of GDP. The composition changed completely. The goods trade surplus peaked at more than 4% of GDP in the mid-1980s and has since turned into a deficit, while the primary income surplus, negligible then, has risen to more than 6% of GDP. He compares this with Britain in the late 19th and early 20th centuries, when net foreign investment income approached 8% of national income, and describes Japan as having moved from workshop of the world to financier to the world.

The paradox he highlights is in the sectors. Standard theory says an ageing society draws down savings and moves towards deficit, and Japanese households did follow that path, while the government ran widening deficits. The surplus survived because non-financial companies, after the investment boom around 1990, cut investment, raised saving and from the late 1990s became chronic net savers. Ueda links this to the long repair of balance sheets after the bubble, a lasting fall in returns on domestic capital and the growth of production abroad, whose income now sustains the surplus. He closes by saying that the surplus has been remarkably persistent and the reasons for it rather less so.

What it means

For the yen the point is the source of the surplus. Income earned and often reinvested abroad does not create the steady demand for yen that an export surplus did, which helps explain why a large surplus has coexisted with a weak currency.